I am often asked why someone who has any assets and who failed to plan for long term medical care by purchasing long term care insurance would even consider Medicaid as a planning option. It's almost as though those who sell long term care insurance (LTCI) are saying, "If they can't qualify for what I'm selling, the heck with them." I know none of the long term care agents reading this are that crass, but what do you advise them to do if they purchase what you sell?
The least you could do for them is refer them to an elder law attorney who will advise them on what precautions they can take to ensure that their spouse does not become impoverished. He or she may aid them in the establishment of an irrevocable health care trust or perhaps a personal services contract. Most elder law attorney's work with competent financial planners to provide products that may provide some long term care benefits, or that can be used to provide income to pay for care or protect the financial well-being of a community spouse.
If you are a long term care insurance specialist and you are not familiar with the techniques that will help your uninsurable clients, perhaps you could spend some time networking with those in our industry who have the knowledge and expertise to help them. You are certainly more inclined to receive favorable reviews and referrals from clients for whom you recommended a viable option to LTCI if they were unable to qualify. If you just "drop them in the grease," they'll let others know that you weren't able to help them, making it tougher to get the next sale.
But why even worry about these things? Why not just let those who don't purchase long term care insurance when they are insurable suffer for their lack of planning? Maybe because it's just not the ethical thing to do... maybe because doing the right thing will be more rewarding in the long run for both you and your client.
And that brings me to the tale of two Joes... just average American workers who don't have long term care insurance because they believed that either their employer or the government would take of these issues. Like most Americans, they are, sadly, misinformed. They thought that Medicare and/or their Medicare supplement insurance would pay for any long term care needs they might have.
Joe A. lives next door to Joe B. They have worked at the same factory making the same wages for their entire life. Both retire and receive the same pension and Social Security benefits. They carry the same insurance benefits through their former employer and are both married and happily retired.
Joe A. has a health problem. He has been suffering from a heart disease for a long time and is on a list to receive a heart transplant. This procedure will cost more than $500,000 and is covered by Medicare and his health insurance. Joe A. will not have to spend any of his money (OK, a small out-of-pocket amount) to take care of his health problem.
Joe B., on the other hand, has a health problem as well, but it is not covered by Medicare. He has developed Alzheimer's and is required to live in a secure facility for his own safety. Medicare doesn't pay for long-term skilled nursing care, so he and his wife must spend down the assets they had accumulated for retirement to levels established by the government before any benefits will be paid by Medicaid. This will, of course, drastically reduce the amount of money available to his spouse when he dies, a problem further exasperated by the fact that her income will be reduced by at least one Social Security check and some or all of his pension benefits.
Does this scenario sound familiar? Does this seem fair -- especially when a little financial planning could keep all of this from happening? Do you know how to counsel this family or to whom to send them for advice?
Let's look at another scenario featuring the same two Joes, and the same setup as before, except that we learn that Joe A. was a spender -- he never saved a dime. Every time he had extra money, he bought a new boat, took a grand vacation, or gambled it away. Joe B., however, was a saver. In fact, when he retired, he and his wife had a nice nest-egg worth more than $200,000. His retirement looked secure.
Now, they both end up needing skilled care. Who gets penalized? The one who spent or the one who saved? Why should Joe B., the one who did exactly what I advised (save for his own retirement) now be penalized for doing the right thing?
The system is flawed and we probably can't fix it with a discussion here. There is a lot of work to be done before we get the population onboard with the purchase of long term care insurance. In the meanwhile, let's not leave our seniors exposed to total impoverishment in order to receive the kind of care they need. Nor should we punish them for behavior that we want to promote.
One day, you and I will be a Joe A. or Joe B. What steps have your clients taken to assure their family that everything they've worked for will not have to be used for long term care expense? How have you put together your estate plan? Does it include a health care contingency? It's hard to make sound financial recommendations to our clients when we, ourselves, have not followed our own advice.
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